discount rate

American  

noun

Finance.

1. the rate of interest charged in discounting commercial paper.

2. the interest rate charged by Federal Reserve Banks on loans to their member banks, usually against government securities as collateral.

3. the rediscount rate.

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discount rate Cultural  

1. The rate of interest charged by the Federal Reserve System on loans it makes to the banking system.

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Because the Federal Reserve System lends money to the banking industry, one mechanism it has for regulating interest rates is to vary the discount rate — that is, to make the money that banks borrow relatively more or less expensive. It is likely to lower the discount rate during economic downturns to stimulate investment and raise it during upswings to check inflation.

Etymology

Origin of discount rate

First recorded in 1925–30

Compare meaning

How does discount-rate compare to similar and commonly confused words? Explore the most common comparisons:

• discount rate vs. interest rate

Example Sentences

When Treasury yields rise, the discount rate goes up, which lowers the present value of those expected future cash flows.

From Barron's • May 19, 2026

Next, lower rates increase the net present value of companies with distant earnings, by reducing the discount rate in valuation models.

From MarketWatch • Nov. 3, 2025

Many clubs offer a discount rate to younger members.

From The Wall Street Journal • Sep. 30, 2025

That changed on Black Friday, when the discount rate began to peak at 30% in the U.S., he said.

From Seattle Times • Nov. 26, 2023

Such a situation would doubtless lead to a sharp advance in the discount rate and to the importation of gold.

From Readings in Money and Banking Selected and Adapted by Phillips, Chester Arthur